Gregoire's budget: $3.5B cut, but no tax increases

OLYMPIA — Gov. Christine Gregoire said there's something for "everybody not to like" in her proposed state budget, which would slash more than $3.5 billion in funding for public schools, social services and other areas to help close the biggest budget shortfall in state history.

She was quickly proved right.

As Gregoire unveiled her budget Thursday, lobbyists complained about cuts to programs that aid the poor. State workers and teachers unions complained about a proposal to eliminate pay increases. Even some Democratic leaders questioned aspects of the governor's budget.

About the only people saying nice things were Republicans.

"She's made some difficult decisions, and that's what we ask for from our leaders and our governor," said Gary Alexander, R-Olympia, the ranking Republican on the House Ways and Means Committee. "I think it's a budget we're going to get behind as a caucus. We appreciate this approach."

Gregoire proposes closing the shortfall, projected at more than $5 bil-

lion in the next two-year budget, by making scores of cuts and using untapped pots of money, including $600 million from the state rainy-day fund.

In addition, the governor is banking that the federal government will send Washington at least $1 billion as part of a bailout package to help pay for Medicaid and welfare programs.

The nitty-gritty

Among the cuts proposed by Gregoire: $682 million in pay increases for state workers and teachers; $500 million in health care for children, the poor and the disabled; and $178 million in funding for Initiative I-728, which was approved by voters in 2000 to reduce class sizes in public schools.

She also would change how state pensions are funded, and reduce contributions to the worker-retirement programs by $400 million over the next two years.No cut was too small to pursue. Gregoire proposes closing 13 state parks to save $5.2 million, shutting the visitors center at the state Capitol to save $1.7 million and eliminating toll-free numbers to the state Department of Revenue to save $260,000.

She also would downsize parts of the state ferry system. The budget would eliminate the ferry between Anacortes and Sidney, B.C.; replace the Tahlequah-Point Defiance ferry with a smaller boat; and build just one new ferry for the Port Townsend-Keystone route, rather than two.

The budget would almost certainly lead to layoffs — perhaps 2,600 state workers in 2009-2011, Gregoire said.

"Hates" it

She said the cuts were necessary, but that she "hates" the budget and expected legislators and lobbyists to loathe it as well.

Senate Majority Leader Lisa Brown, D-Spokane, and House Speaker Frank Chopp, D-Seattle, both said they're concerned about Gregoire relying so much on a federal stimulus package.

"Counting on $1 billion in federal money when the president isn't even sworn in is quite an optimistic assumption," Brown said. "You can't bank that or budget it until you have it."

Senate Ways and Means Chairwoman Margarita Prentice, D-Renton, also thought Gregoire was too optimistic about the size of the projected state shortfall. Prentice thinks it will get larger.

House Ways and Means Chairwoman Kelli Linville, D-Bellingham, questioned Gregoire's proposal to save $160 million by eliminating a program that provides a temporary safety net for people unable to work because of mental or physical disabilities.

"I know from personal conversations that the ... cut is going to cause people some problems," said Linville, the new chairwoman of the House Ways and Means Committee.

Nick Federici, a Washington Low Income Housing Alliance lobbyist said Gregoire's budget "is sort of the nightmare before Christmas for low-income folks."

What about taxes?

The budget would not increase taxes or end tax breaks for businesses.

"There is no way to tax your way out of this problem," Gregoire said. "We have to live within our means."

But Brown said she wants to take a close look at eliminating tax breaks to raise money.

"Is every tax exemption that somebody enjoys really important when paired up with people losing their health care?" she asked.

Some legislators also have talked about sending voters a tax package to help balance the budget.

The governor's office would not speculate whether Gregoire would support such a move.

The governor's budget next will go to the Legislature for consideration. The state House and Senate will present their own proposals during the legislative session that starts next month. Then all three sides have to reach an agreement.

Budget's basically flat

Overall, the governor is proposing a 2009-11 spending plan worth $33.5 billion. The Legislature approved spending $33.6 billion in the current two-year budget, which runs through next June, but lawmakers are expected to cut around $300 million out of that spending plan because of declining tax revenue.

In that context, Gregoire's budget for the next two years represents an increase of less than 1 percent over current spending.

Which raises a question: What's being cut if spending is essentially flat?

The answer: Mostly proposed budget increases.

Simply put, it generally costs more each year to provide the same level of state services.

For example, when more children enroll in public schools, the state must pay for their basic education as required in the state Constitution. Washington currently is seeing a spike in enrollment, in part, some officials think, because many financially strapped parents are pulling their kids out of private school.

In addition, the state, like the private sector, has to deal with increased health-care costs and wage increases.

Because the state by law has to fund certain services, such as basic education, lawmakers must find cuts in areas that are not protected, such as pay raises and certain health-care programs.

Gregoire's proposed budget closes the current projected budget shortfall, but the economy could get worse. That would likely mean deeper cuts.

Gregoire tried to sound a positive note Thursday amid the gloom, saying "it will get better and we will get through it. But we all have to work together."

Staff reporter Susan Gilmore and The Associated Press contributed to this story.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com